Economic growth rate may fall to 3.2pc

WASHINGTON (Pajhwok): Projecting a drop in Afghanistan’s growth rate to 3.2 percent this year, the World Bank on Wednesday expected the country’s economy would recover around five percent in 2015 and 2016.

But a lot of it depends on the security situation, the international body said in a report on Wednesday. The economy will be weighed down by persistent uncertainty caused by the withdrawal this year of international forces and a subsequent cut in foreign aid.

The World Bank said in its latest report “South Asia Economic Focus” forecast that economic growth would rise to 5.8 percent in 2015 from 5.2 percent this year and 4.8 percent last year.

“In addition, the country’s agricultural output has declined. Economic growth was therefore projected to fall to 3.2 percent this year after 3.6 percent in 2013. Depending on security and whether agriculture rebounds and mining output increases, Afghanistan could see growth recover in 2015 and 2016 to around five percent.”

In half-yearly report, the bank said Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka appeared to have largely recovered from last year’s financial turmoil caused by changes in US Federal Reserve monetary policy.

It added the Afghanistan’s economic growth fell dramatically in 2013, to an estimated 3.6 percent of GDP from 14.4 percent in 2012, as heightened uncertainty about political and security transition led to a slump in investor and consumer confidence.

It was the second successive year of robust agricultural output – cereals production rose 2.7 percent above the bumper harvest of 2012 – but the bounty could not make up for the falloff in private investment and tepid growth of non-agricultural sectors.

The number of new firm registrations fell sharply in 2013 to its lowest level in five years, with a reduction in both local and foreign new fixed investments, the report said.

“The slide in confidence is rooted in concerns about national security and stability after most international forces withdraw in 2014 and doubts that a cohesive, broadly accepted government will take hold within a reasonable period after the April 2014 elections,” it said.

Growth is projected to remain weak in 2014, although a smooth political and security transition would help bolster confidence and enable economic growth to pick up in 2015, the World Bank said.